Wachovia preps pair of first-timers for term shipping container ABS

Although there has been no new issue activity for marine container ABS seen throughout 2002, that should change this quarter. Wachovia Securities has transactions in the works for the near term for a pair of first-time issuers - one of which has been in the planning stages for over a year.

Throughout last week Wachovia Securities marked a $300 million Ambac-wrapped container lease-backed offering for GE SeaCo SRL, a London-based joint venture between triple-A rated General Electric Corp. and single-B rated Sea Containers Ltd. The Rule 144A GE SeaCo 2002-1 offering was shown to European investors the week of Oct. 28 and is expected to price this week. Price guidance for the five-year floater is 55 basis points over one-month Libor.

Both entities are quite diversified. GE has its hands in everything from aircraft engines to home appliances to commercial and consumer loans. Sea Containers Ltd., in addition to the obvious oceanic cargo transportation devices, ironically makes most of its revenue through the 76% stake it has in luxury-hotel chain Orient-Express Hotels Ltd. Sea Containers also has publishing and real estate units.

Wachovia is also scheduled to solely manage an approximately $450 million deal for Interpool Inc., after having placed $540 million of receivables into its Variable Funding Capital Corp. conduit earlier this year. Interpool's first term securitization, currently in the structuring phase, will feature a full MBIA wrap.

Aside from this being the inaugural offering for Interpool, it is unique because it is structured similarly to a leveraged lease. In fact, the equity in the deal was reportedly placed with a pair of leveraged-lease investors.

Within the Interpool deal, the payments from the chassis are dependent on Interpool's ability to reap value from the portfolio, continually re-leasing the chassis for as much return as possible, although there is no guarantee of a return (See ASR 10/07/02).

While incorporating a leveraged-lease structure is not entirely new to securitization, this is the first visible instance that the combination involved an operating asset securitization, as opposed to the more typical lease ABS, where the debt is backed by scheduled payments from a portfolio of term contracts, a source said.

This has been somewhat of a slow year for the marine-container sector, a produce of the market in general, which issues more to pay down conduit facilities more than to take advantage of a beneficial interest rate environment. GE SeaCo, for example is in the term market to pay down the conduit it set up last summer, through Wachovia's VFCC multi-seller facility, sources said.

Overall, the sector looks healthy, according to Ambac managing director Nick Goumas, who notes that utilizations have been up throughout the year and that these deals are modeled conservatively, "with a fair amount of cushion" from a worst-case scenario. Goumas added that demand for shipping containers has risen this year, with much of the excess capacity shipped to Asia.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.